Suggestions on how to best proceed

ZincAlloy

My situation in summary is:

• I have a mortgage of about £6,000 left to pay off on my house
• I have been out of work since the pandemic (over retirement age now and cannot find employment) 
• My pension pot (accessed through draw-down) is about to run out in the next two months, and I have no other savings
• My house currently is on the market, as I plan to downsize and live off the remaining equity after buying a smaller property outright (mortgage free)
• My credit cards are nearing their credit limits
• Although I have never missed a loan payment/mortgage payment/credit card payment in my life, my Credit Rating on Experian has recently gone from Excellent (999) to Good, presumably due to my current borrowing on credit cards

I am looking for suggestions as to the best way to proceed. I have made loan applications via various popular finance websites (including MSE) but have been told I am not eligible, again presumably due to my current borrowing situation. My plan is to pay off all my debt once the house sells, so I am not a debt risk, but obviously there is no way of indicating this on the online applications.

Any advice/suggestions as to how I can get past this temporary situation would be appreciated. I may be able to get a loan secured on the house, though I'd rather not do this unless I have no other option. I'm wondering if a direct approach to a bank (face-to-face), in which I can explain my situation, might work?

Brie

Talk to your bank.  Tell them what the situation is and that you need time to find the remaining £6k, tell them you're stopping the payments and ask for them to stop the interest on the mortgage.  They might be happier if you make token payments like £10 or £50 a month just to show you are not trying to get out of paying.  Do the same with your credit cards but with a £1 token payment.  Keep paying your council tax and anything else priority. 

They will probably all want you to submit a budget to show what your financial situation is like.  You can put together a statement of accounts (SOA) that you can find on the top stickies on the debt free board.  Or you can go through one of the debt advice agencies - StepChange, NationalDebtline, Community Money Advice (CMA) or Citizens Advice.

If you're not going to need new credit for any other reason there's no concern about there being default/non payment markers on your credit history.  

Don't turn any of your credit card debt (unsecured) into secured debt by extending your mortgage.  

ZincAlloy

Thanks Brie
I did speak to my bank a while ago, but they weren't a lot of help, just pointing out they would not expend me a loan to clear the debts or mortgage. They didn't mention the option of suspending payments, so thanks for that.

I have also spoken to CABs but they can't help on loan suggestions. They did say the same as you about asking for a moratorium on payments, or even requesting a credit card write-off. I don't really want to screw up my credit rating completely, as who knows what credit I might want in the future. 

silvercar

Interest on a £6k mortgage should be £25-30 a month. Have you checked they are charging you correctly. If you are short of money ask to go interest only for a few months.

Brie

CA won't have loan suggestions as everyone who works in debt advice will tell you that consolidation loans (named because it lumps all your debts into one) are never a good idea.  The bank won't give you one, not so much due to your age but because you already have too much debt compared to your income.  And besides, if they give you a loan who knows what you'd do with it.  They've only your word that you would clear the mortgage and the other debts.  For all they know you might blow the bundle on Ol' Maisie in the third at Belmont.  

But if you care to post your SOA on the debt board once you get it done there may be lots of good ideas on how to cut out some expenses and more on how to handle the debt you already have.  

MEM62

ZincAlloy said:

I did speak to my bank a while ago, but they weren't a lot of help, just pointing out they would not expend me a loan to clear the debts or mortgage.

The call center staff have a limited options to assist you.  Also, a loan does not clear your debts - it just moves them so this would not help your situation.   

ZincAlloy said:

They didn't mention the option of suspending payments, so thanks for that.

It may not be available as part of your mortgage T's and C's and, if you stop paying without agreement, you will be in default of your mortgage terms.  That is not a good position to put yourself in and penalties and charges can mount up quickly.  You can suspend payment to your other (unsecured) debts with fewer consequences. 

 ZincAlloy said:

I have also spoken to CABs but they can't help on loan suggestions. 

Without an income, there are not likely to be any options open to you in terms of borrowing.  

ZincAlloy said:

They did say the same as you about asking for a moratorium on payments, or even requesting a credit card write-off. 

That is worth trying with any unsecured borrowing that you have.  Explain your circumstances and ask whether they will make a commercial decision to write off the debt.  (I might not mention selling the house) 

ZincAlloy said:

I don't really want to screw up my credit rating completely, as who knows what credit I might want in the future. 

That is not a priority and, in truth, there is probably no way through your current situation without damage to your credit standing. Unless you have an income at some future point you will not be in a position to borrow so there is little point in any effort to preserve your credit worthiness.

How much equity do you think you can release, after legal and moving costs, from your current property?       
 

  
 

ZincAlloy

MEM62 said:

That is not a priority and, in truth, there is probably no way through your current situation without damage to your credit standing. Unless you have an income at some future point you will not be in a position to borrow so there is little point in any effort to preserve your credit worthiness.

How much equity do you think you can release, after legal and moving costs, from your current property?   

Fair point

Around £550k, which is what makes it so frustrating as I'll be able to settle all my debts then